In today’s daily we have covered stock research on Sims Metal Management (HOLD).












The Dividend Stocks Blog
 
The S&P 500 was down by 0.73points or 0.04% on Thurday to 2037.35 points.  Energy shares fell their most in a month on Thursday as crude prices slid, leaving the S&P 500 little changed despite gains in Wal-Mart and other consumer stocks. Exxon fell 1.1 percent to $94.39 as the largest weight on the S&P 500 energy sector which fell 2.2 percent. Brent crude fell under $78 a barrel while U.S. crude tumbled 3.8 percent to $74.27, both at their lowest in more than four years.

Apple  rose as high as $113.45 to a fresh record while Microsoft up 1.6 percent at $49.55, swelled to a market cap above $407 billion and overtook Exxon Mobil as the second-largest publicly traded U.S. company, behind Apple. J.C. Penney  shares tumbled 7.7 percent to $7.16 the day after it reported a smaller-than-expected quarterly loss but said same-store sales were flat and slightly cut its full-year revenue forecast. 




APPLE Daily Chart (Source – Thomson Reuters)
S&P ASX 200was down by 20.4points or 0.37%on Thursday and closed at 5442.7 points. Westpac shares slumped 1.1 per cent to $32.96. Commonwealth Bank of Australia finished 0.7 per cent lower at $81.27, National Australia Bank lost 0.8 per cent to $32.40 and ANZ Banking Group dipped 0.5 per cent to $32.05. GrainCorp shares fell 1.1 per cent $8.45 following a 64 per cent dive in full-year profits to $50.3 million, driven by $44 million worth of one-off charges. 

Ramsay Health Care has signed a provisional agreement with an operator of five hospitals in the Chinese city of Chengdu. Ramsay will have a 25 per cent stake in the final joint venture with its partner Sime Darby and China-based Company Jinxin.  Flight Centre Travel Group shares fell 0.4 per cent to $40.12 after the company’s CEO Graham Turner said consumer confidence is unlikely to rebound to the same level it has been thanks to a downturn in the mining sector. Medusa Mining was the top performer on the ASX 200.

Medusa Mining Daily Chart (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-


 
Stock of the Day - Sims Metal Management (HOLD)

Sims Metal Management (SGM), the world’s largest listed metal and electronics recycler, is covered in today’s report. The financial highlights for FY14 indicate a 27% rise in underlying EBITDA and 333% rise in underlying NPAT as opposed to FY13. A final dividend for FY14 of 10.0 cents per share, fully franked, was determined to be paid to shareholders representing the Company’s first payout since the end of FY12.


Financial Highlights (Source – Company Reports)

Even with a strong performance, the Company’s business got affected from harsh market conditions.  In fact, periodic low levels of secondary metal generation, high level of competition, and extreme winter weather conditions in North America posed issues to SGM’s operations. A statutory net loss after tax of $89 million was also reported. Moreover, return on invested capital remains was below expectation and will be a focus of attention in the coming year. During FY14, capital expenditures were $64 million, i.e., a decline from $149 million in the prior year owing to completion of major projects such as New England Expansion and New York City Municipal Recycling contract.

With the help of healthy cash flow from operations and disciplined capital management, the Company could reduce net debt by $196 million in FY14 to a net cash position of $42 million at 30 June 2014. The Company expects to have increased capital expenditure with the initiation of new projects.

SGM has also presented the details of its five year strategic plan in July 2014 to improve the financial returns of the Company. This is expected to improve underlying EBIT by more than 350% over FY13. The plan constitutes three phases which will Streamline the business to lower cost and higher margin operations, then Optimize the business based on profitability and Grow the business through reinvestment into attractive operations.

The Company is exiting from non-strategic businesses and reducing cost overheads to focus on better performing and higher growth potential operations. SGM is also trying to strengthen supplier relationships and ensure the right material is bought for the right price.


Progress towards Five Year Strategic Plan (Source – Company Reports)

SGM is also aiming to minimize freight and handling costs while leveraging export capabilities. SGM is further growing its metals recycling volumes through organic market share and selective acquisitions with growth in electronics recycling through asset management and services.


Capital Expenditure (Source - Company Reports)

Primarily, SGM’s earnings growth are being driven by Australia and UK Metals. In North America, the EBIT declined by $21m over FY13 owing to lower earnings from electronics recycling (“SRS”) and lower sales volumes in metals recycling affected by the weather. Recent restructuring initiatives were announced which determined the electronics recycling business of SRS Canada to be outside of the Group’s long term strategic interests. Further, SRS facilities in Edison, NJ and Dallas, TX have been closed. The Company also reported for completion of New England expansion and New York Municipal Recycling Plant in Brooklyn. The Company expects to deliver annual EBIT of $11 million, with anticipations that 50% of the target will be achieved in FY15 and the full 100% in FY16.


SIMS Daily Chart (Source - Thomson Reuters)

Australasia EBIT increased by $33m over FY13 by virtue of stronger sales volumes and an expansion in sales margins in the Australia metals recycling business. The sales margins and sales volumes increased compared to FY13 leading to significant earnings improvement. Further, earnings from Australia Metals also benefited positively from recent changes to the business, such as acquisition of the paramount Browns ferrous metal yard in South Australia, a capital upgrade of the St. Mary’s yard in New South Wales, and the installation of a downstream non-ferrous extraction facility in Victoria. SGM initiated new shredder construction in Western Australia and an existing shredder will be replaced in view of capacity enhancement for future market growth.

In Europe, the EBIT increased by $40m over FY13 owing to materially improved results in UK Metals and SRS Germany. These were partially equipoised by losses in UK SRS.


SRS Sales Revenue by Region FY14 (Source – Company Reports)

SGM’s product-wise performance illustrated Ferrous EBITA increase of 30% based on stronger margins per tonne driven by improved buying practices and lower controllable costs. Non-Ferrous EBITA increased by 8% due to stronger sales volumes and wider sales margins. There was a 2% improvement in SRS EBITA driven by stronger earnings in SRS Germany and Australasia, though partially balanced by losses in SRS Canada and UK SRS.


Implementation Progress Ramping Up (Source – Company Reports)

Amidst the scenario with softness in steel prices and declining Australian dollar, SGM may still be able to out-power many by virtue of its core strategy and efforts. Accordingly, we put a HOLD recommendation for this stock at the current price of $10.80.

 
Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people.
Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).
The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation.
Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product.
The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide.